How To Sell A Rental Property In California

Selling Rental Property With Tenants In California How To Sell A Rental Property In California We have formulated a guide to help those that are asking “How To Sell A Rental Property In California ” recently and are looking at solutions. If your question is not listed or answered in this guide about selling investment properties with tenants In California , please feel free to call us at +1(866) 497-8248 or fill in the contact us form below, and we will try to answer any and all questions you may have.

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Selling Investment Property In California

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Steps To Sell A Rental Property In California

Selling a rental property in California can be a complex process, especially if you have tenants. If your property is occupied, you’ll need to follow California’s tenant laws, which may require proper notice before selling or negotiating a buyout if they are on a long-term lease. Selling as-is to a cash buyer like Sell Quick California can simplify the process, as we purchase properties in any condition and can even work with tenant-occupied homes. This eliminates the hassle of making repairs, staging, or waiting for a traditional buyer. Additionally, selling to a cash buyer helps you avoid the risk of a deal falling through due to financing issues.

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Step 1: Determine Your Goals & Timing

Evaluate if you need to sell quickly (e.g., tired landlord, need capital, tenant issues, or market timing).

Cash Buyer Option: Ideal for fast sales, especially for properties with tenant damage, deferred maintenance, or if you want to avoid listing delays.

Other Options: Traditional MLS sale, 1031 Exchange, For Sale By Owner (FSBO), or selling to another landlord.

02

Step 2: Review the Lease & Tenant Rights

Cash Buyer Option:

Cash buyers often purchase with tenants in place, honoring existing lease terms or negotiating relocation.

Other Considerations:

Month-to-month tenants require a 30-60 day notice depending on local rent control laws.

“Cash for Keys” agreement can incentivize tenants to vacate.

Consult with a real estate attorney if subject to Just Cause Eviction or Rent Control (e.g., in Los Angeles, Berkeley, Oakland, San Francisco).

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Step 3: Evaluate the Property Condition

Cash Buyer Option: No repairs needed; they buy as-is.

Other Options:

MLS sale may require inspections, appraisals, and repairs.

Investor-to-investor sale (landlord-to-landlord) might still accept minor issues.

04

Step 4: Get a Property Valuation

Cash Buyer Option:

Request a no-obligation cash offer from local buyers like Sell Quick California.

They evaluate based on as-is condition and current rental income.

Other Options:

Hire a real estate agent for comparative market analysis (CMA).

Get an appraisal or Broker Price Opinion (BPO).

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Step 5: Decide How to Sell

Option 1: Sell to a Cash Buyer (Fastest & Simplest)

Close in 7–14 days

No fees, no agents, no repairs

Ideal for off-market or distressed rentals

Option 2: List on the MLS with an Agent

Wider exposure, but longer process

Requires home showings, tenant coordination, and possibly repairs

Option 3: Sell FSBO (For Sale By Owner)

Save commission, but you handle everything

Requires understanding of contracts and negotiations

Option 4: 1031 Exchange

Defer capital gains by reinvesting in another income property

Must identify a new property within 45 days, close in 180 days

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Step 6: Disclose Property Details

Legally required to disclose tenant status, lease terms, known defects, and rent control history.

Provide:

Lease agreements

3-day notices or eviction history (if any)

Maintenance or repair records

Cash Buyer Advantage: Often require minimal documentation.

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Step 7: Handle Tenant Coordination

Provide proper notice for inspections or showings (24-48 hours).

In rent-controlled areas, understand legal restrictions on tenant displacement.

Offer incentives or relocation fees if needed.

Cash buyers may purchase without disturbing tenants.

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Step 8: Negotiate & Accept Offer

Cash Buyer: Typically submit non-contingent offers with proof of funds.

MLS or FSBO: Be prepared for loan contingencies, inspections, and appraisal delays.

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Step 9: Open Escrow and Complete Sale

Cash Buyer: Escrow opens immediately; no lender delays.

Title company handles:

Transfer of funds

Lien/payoff verification

Tenant lease transfer (if applicable)

Other Methods: May include additional buyer inspections or loan underwriting delays.

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Step 10: Handle Taxes & Reporting

Capital Gains Tax: May apply if the property appreciated significantly.

Depreciation Recapture: Also taxable.

Consult a CPA about:

Offsetting gains with losses

Using a 1031 Exchange if reinvesting

Qualified Opportunity Zones (if applicable)

Frequently Asked Questions & Answers

Selling a house comes with expenses that will eat out your profit. Suppose you are selling above what the house initially cost you. In that case, you must also worry about paying Capital Gains tax. Here are a few things that can be deducted before calculating your capital gains tax.
Marketing and Advertising Fee
Everyday expenses under this category that are covered include the cost of printing flyers and brochures, and ad placement online, in newspapers, or on billboards. You can also deduct the expenses for hosting an open house, including refreshments and signage.

Repairs and Maintenance
Money spent on maintenance and repairs requested by the buyer to get the property ready for sale can be deducted.

Owner’s Title Insurance Policy
The seller has to purchase this insurance to protect the buyer from any legal issues regarding the property title. Legal issues that may arise about a title could include encumbrances or liens.

Transfer Taxes
Many state and local governments levied transfer taxes when transferring property ownership from one person to the next. The tax amount depends on the house’s value at the time of sale and the property’s jurisdiction.

Deed Recording Fees
These fees are a percentage of the purchase price and can be deducted if the seller pays them as a selling expense.

Other Closing Costs
If you need to update property boundaries, this will require a survey. This survey fee can be deducted as a selling expense. The same is true if the seller has to pay for inspections or appraisals to get the property ready for sale.

Home Warranty Costs
You can sweeten the deal for a buyer by adding a home warranty. This will protect the buyer from unexpected repairs that may come up after the sale.

All Legal and Professional Fees Related to the Sale
If you hire a lawyer to help you with the sale, their fees can be deducted as a selling expense. However, you can’t have these fees deducted if you handle the sale yourself.

Property Taxes Paid During the Sales Process
In a typical real estate transaction, the buyer and seller typically pay the property taxes due at the closing. In most cases, the seller will pay a prorated amount for the time they have lived in the space since the beginning of the new tax year.

Yes, you can. You must provide your tenant with at least 60 days written notice before their lease term or rental period ends.

Some investors lie to own an investment property for a while before they attempt to re-sell. The buy-and-hold strategy creates a rental stream of revenue income and allows a property to appreciate.

Waiting is only sometimes the best option; sometimes, you have to let the market guide you, and sometimes, this may mean selling sooner than later. Here are some of the instances where it would make sense to sell your rental property.

The property is no longer profitable.
The property needs extensive repairs.
You see changes in the housing market.
National housing trends are affecting your local housing market negatively.
There is an overall lag in the national economy.
The interest rates are rising and depressing property values in the surrounding area of your property.

You will pay four taxes on the sale of a rental property in California. These are;
1. Federal capital gain tax
2. Depreciation Recapture tax
3. California capital gain tax
4. California depreciation recapture tax

Selling a rental property is slightly different from selling your primary residence. Still, both sales are subject to capital gains tax. So the profit you make off selling your rental property will be taxed.

You can avoid capital gains tax in four ways when you sell your rental property in California.

Use your retirement account when purchasing a property.
Convert the property to your primary residence before selling.
Make use of tax harvesting.
Use a 1031 tas deferred exchange.

Keep your rental property for at least one year to avoid short-term capital gains tax before putting it on the market. You will also want to wait until your tenant’s lease expires if you have renovations to complete.

The 2 out of 5-year rule states that you should have had the property as your primary residence for at least two years out of the five years before the date of sale. These two years can be consecutive as long as they fall in the past five years before the sale.

Giving your tenants written notice to vacate the property would be best. They should be given a minimum of 6 months’ notice before the end of their lease or their rental period if they do a month-to-month rental.

Yes, you can still sell your house if you have tenants. It is your house, and the final decision to sell is yours. But remember, your tenants do have rights, so while selling is within your rights, you will also need to consider your tenants’ rights throughout the entire selling process.

Yes, your landlord can sell their property while you are still paying rent and while you are still living at the property. When the sale is final, you may find you have a new landlord or have received your notice of the sale in the right amount of time to find you a new place to live if the new owner wants to use the property as their primary residence.

Depending on the circumstances surrounding the sale, you can get some money to help with your move.

The law allows your landlord to have you move out for several “no-fault” reasons. If you are evicted for one of these reasons, you should be provided with one month’s rent, or they should waive one month’s rent so you can have some financial assistance to move out.

If a tenant has a one-year lease and there are nine months left on their lease at the sale date of the property, the tenant can occupy the unit for the remaining months of their lease. However, the tenant must continue to pay rent and carry out the original lease terms even if the rent will be delivered to the new owner.

A landlord cannot evict a tenant if they make a complaint against the landlord for discriminatory behavior. The Fair Housing Act protects tenants from landlords being biased based on color, sex, national origin, race, religion, disability, or family status.

If your landlord sells your rental property, you have the right to at least six months’ notice and the ability to live out your lease. If the sale is finalized while you are still in the home, you may need to pay rent to the new owner instead, but the rest of your lease agreement should stand till the end of the lease.

California could be more landlord friendly. Renters have many protections, including rent control legislation under a rental agreement. If you purchase a rental property, you want to know rental law to ensure you don’t break any.

In 2023, we expect to see an appreciation of 5.2%. This means property values should go up significantly over the rest of the year. So if you are considering selling a rental property, it should be a good move for 2023.

If you need to sell your rental property in California fast, let us do the job for you! We are experts in the market and can have a cash offer ready for you within 48 hours. So give us a call today and get your rental property sold fast.